Vodafone seals biggest deal in a decade with $130bn Verizon sale

Vodafone has sealed the $130bn (£84bn) sale of its stake in US mobile network
Verizon Wireless, the world’s biggest deal for more than a decade.

After months of rampant speculation, the partnership’s majority owner Verizon Communications signed off the purchase of Vodafone’s 45pc stake on Monday.

The deal will put an end to the telecoms giant’s 14 years in the US, which has been characterised by disagreements between the joint venture’s owners.

It will also result in an enormous return, with £54.3bn sent back to Vodafone investors, including the roughly 500,000 retail investors that Vodafone has in Britain.

The transaction will be made up of $59bn in cash, $60bn in Verizon shares, and $7.5bn worth of loan notes and reduced liabilities. It will also see Verizon’s 23pc stake in Vodafone’s Italian operation – valued at $3.5bn – returned to the British company.

The return – which will include all of the Verizon shares from the deal and £15.4bn in cash – represents 71pc of the net proceeds from the sale.

Vodafone also announced that it would set aside £6bn for investing in infrastructure such as cable networks and a faster roll-out of 4G services. This, combined with the shareholder return, appeared to make an acquisition spree unlikely, although chief executive Vittorio Colao said there remains money for deals if opportunities surface.

Mr Colao called the special payout, which equates to 112p per share, a reward “for the long term support of our strategy since our initial investment [in the US]”.

He said that retail investors – many of whom retain shares from Vodafone’s privatisation in the 1980s – could choose whether they want to receive the payout in Verizon shares or cash.

The one-off dividend will be paid when the transaction completes in the first quarter of 2014.

Mr Colao had other good news for shareholders yesterday, promising an 8pc increase in the annual dividend next year with further rises after that.

He also confirmed that the deal will not be subject to any UK tax, and is only liable for one payment of less than $5bn in the US. The Verizon Wireless stake is held by a Dutch subsidiary, and Vodafone will benefit from a tax exemption on disposals in Dutch legislation.

Mr Colao stressed that the same clause applies to British tax law, meaning that if the UK-based parent company was selling the stake it would also be exempt from tax.

Margaret Hodge, a senior Labour MP who chairs the Commons Public Accounts Committee, had called for Vodafone to pay “a fair share” to the Exchequer, but Mr Colao said the deal was very straightforward and “not comparable” to the affairs of Starbucks and Google who have been criticised over their tax arrangements.

The return to shareholders is expected to act as a boost to George Osborne, the Chancellor, with a huge injection of capital being injected into the economy.

Verizon Wireless was born out of the merger of Vodafone’s Airtouch and the mobile division of Bell Atlantic – which then became Verizon – in 1999. It has been the British company’s most lucrative asset for some years, as its European businesses suffered from recession and enforced cuts to mobile bills.

However, Mr Colao said the price had been too good to turn down. “After years of conversation we had an offer we thought was good value that enables both companies to push forward,” he said.

Verizon’s acquisition was the second-biggest in history, following Vodafone’s own $172bn takeover of Germany’s Mannesman in 2000.

Shares in Vodafone have risen to levels not seen since 2002 as speculation that the company will sell its stake has intensified. They rose 7, or 3.37pc to 213.2p yesterday in anticipation of the deal, which was not announced until markets closed.